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"Less Bad" Is Good

Or so Citigroup has just found out. Its shares are up over 3% on pre-market trading. That's because it has stated that the final diluted share count will only be 58 billion, rather than 60 billion shares.

"It's all relative" has become a mantra of portfolio managers. So they will take a stock down, way down, when things look worst, then bring it "back up" (a little), when only the "second worst" obtains. That's a roller coaster way to behave.

Ben Graham said that you will profit only from the pocketbook, not the wisdom, of your partner, "Mr. Market." That is, know the games that the market is playing, but don't try to play them. Instead, use "average" or "rational" expectations for scenarios. When the market goes below those expectations, buy. When in goes above, sell. Don't follow the crowd, because you will just get trampled.

The overemphasis on "relative" has taken too much emphasis away from "absolutes." A performance of -30% in 2008 was a good "relative" performance. From an absolute perspective, it was a disaster. We don't want to go there (nor did we).